Last week we looked at some of the benefits for Dara & Norma to run their business in a company. We showed the advantages of this, especially the tax savings. In case you missed this Read here
This week we are going to look at the new employee wage subsidy scheme. This is very topical for employers. It will be of benefit to them in the coming months, once they qualify
You may be aware that the Temporary Wage Subsidy scheme [TWSS] is coming to an end on the 31st of this month. The EWSS will replace the TWSS
The purpose of this is to give you some information about the new scheme. We will let you know about the eligibility and what you need to do to register. There is also other information around payment dates and tax clearance.
Businesses will need to show their basis for an expected 30% reduction in turnover or customer orders. This is for the period 1 July 2020 to 31 December 2020. The reduction in turnover or customer orders is relative to
- The same period in 2019 (1 July 2019 to 31 December 2019) where the business was in existence before 1 July 2019
- Where the business commenced between 1 July 2019 and 1 November 2019, the date of commencement to 31 December 2019: or
- Where a business commences after 1 November 2019, the projected turnover or orders
Revenue confirmed that the cash reserves of a company will not impact eligibility for the EWSS. To see how the 30% reduction in turnover works see appendix 1 on pages 17 & 18 of the guidelines
Rate of payment
The rate of weekly subsidy the employer will receive is as follows:
Employee Gross weekly wage Subsidy Payable
|Less than €151.50||Nil|
|From €151.50 to €202.99||€151.50|
|From €203 to €1462||€203|
Employers who wish to avail of the EWSS must:
- register for the scheme, by making the relevant self-declaration on ROS, before the first pay date of an EWSS claim,
- be registered for PAYE/PRSI and have a bank account linked to that registration, and
- have tax clearance.
The EWSS has different eligibility criteria to the TWSS. As a result, there is a separate registration process for the scheme. Registration for the EWSS is now open.
Agents registering employers for the EWSS
You must submit a new signed agent link if your agent is registering you for the EWSS. This is the case even when you are already linked as a financial and payroll agent. Revenue are insisting on this as the EWSS is a separate registration to other taxes. But, Revenue have confirmed that they are willing to accept an e-mail from the employer. This email will confirm the appointment of the relevant agent on their behalf.
Revenue promised that any employer who had tax clearance at the start of the pandemic would keep it. That promise is still in place. Employers can check their current tax clearance status through ROS.
Current tax clearance status displays in blue writing above the grey banner for ‘My Frequently Used Services’.
Revenue confirmed that over 16,000 employers on the TWSS scheme did not have tax clearance. Revenue issued a notice to employers and agents about the EWSS scheme through ROS (i.e. week ending 16 August). The notice included information on tax clearance. This is a prerequisite for registering for and participating in the scheme. The communication that issued informed employers that currently don't have tax clearance.
Revenue emphasised the importance of employers acting now. This is to ensure they get tax clearance if they wish to take part in the scheme from 1 September. This includes employers who did not need tax clearance when carrying out their business before. You can process applications online through the eTax clearance (eTC) system in ROS or MyAccount. The application system contains a drop-down menu of categories. This includes EWSS as an option.
The eTC system operates in ‘real-time’. Once completed and submitted, Revenue assesses the application. Revenue confirm successful applications on the screen within a few seconds. Any employer who does not meet the requirements for tax clearance will see the reason why the application was not successful. Once the employer deals with the issues, the business can reapply for tax clearance. “Connected persons” must have tax clearance for the business to have tax clearance. As an example, for a partnership to have tax clearance, the partners in that business would have to be tax compliant. For a company, the directors and shareholders would have to be tax compliant.
In very limited or exceptional circumstances it may be possible to get temporary tax clearance. Revenue will consider the circumstances on a case by case basis. The employer/agent will need to contact the Collector General’s Division. This is through MyEnquiries or telephone 01-7383663 as soon as possible. They will need to do the following:
- outline the reasons why they cannot address the outstanding matters,
- agree on a timeframe when they will submit the outstanding returns and
- enter into a phased payment arrangement with Revenue (for debts that do not qualify for the debt warehousing arrangement).
In all circumstances, the employer needs to regularise their tax affairs and have tax clearance. Revenue will not pay an EWSS subsidy in respect of September payrolls without this
The pay date will determine whether the TWSS or the EWSS regime will apply. The TWSS will apply to pay dates on or before 31 August 2020. The EWSS will apply to pay dates on or after 1 September. So if an employee is paid in September for work undertaken in August, the EWSS subsidy rates will apply (i.e. not the rates and rules for the TWSS). The EWSS also differs from the TWSS in the timing of the subsidy payment. The EWSS is paid monthly in arrears. Revenue will pay the subsidy payment for September pay dates with the monthly return on 14 October).
“Sweepback” for early entrants
It will be possible to backdate EWSS claims to 1 July 2020 for certain employees. These would include those excluded from the TWSS, for example, employees of new entities, seasonal employees, and new hires. Revenue will make the payment for July/August via a “sweepback” in September. Revenue’s Guidelines on the operation of the EWSS (on pages 14 and 15) provide more details on the timelines surrounding this process.
Revenue will provide employers with a specific template at the end of August. This will allow the employer to submit the relevant information in early September. Revenue will then calculate and process the subsidy payment in mid-September. Revenue will also make the relevant change to the employer PRSI balance due. As announced in last week’s press release, Revenue will issue further details on this process next week.
Revenue will make subsidy payments for September pay dates and thereafter, monthly in arrears. For payments to process, in all cases, the employer has to have tax clearance.
Interaction with the Short-Time Work Support
Can employers avail of the EWSS, in cases where employees are on Short-Time Work Support from the Department of Social Protection? Employee claims for this social welfare support will not impact on their employer’s eligibility for the EWSS. The gross pay made by the employer to the employee will determine the subsidy amount to the employer.
The Institute asked Revenue about plans to include proprietary directors in the EWSS. The Department of Finance is to issue guidance about the inclusion of certain proprietary directors in the EWSS. Revenue will communicate this once they receive the guidance
Other Key points
Other relevant points in relation to the EWSS are
- The subsidy is a payment to the employer and is a taxable source of income
- For employees that are eligible for the subsidy, a reduced rate of employer’s PRSI at 0.5% applies
- You need to continue to track eligibility during the term of the scheme.
Employers should undertake a review on the last day of every month to ensure they continue to meet the eligibility criteria. If your turnover in the period from 31 July to 31 December 2020 improves so that you will not be down 30% then you should come out of the scheme. Subsidy payment made to that date will not be repayable provided you satisfied the conditions for registration.
Action points before first pay date in September
- Assess if you are eligible to apply for the scheme – review the guidelines and discuss with your advisor and document this
- If eligible verify that you have tax clearance. If not, deal with this immediately
- Apply for the scheme. Decide if you or your agent will apply. If it’s your agent, they will need to get an agent link or give them an e-mail confirming they will be acting on your behalf for the EWSS